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Is the Czech Republic Joining the Flat Tax Club?

Although the government lacks a majority in Parliament, the Czech Republic’s Prime Minister has announced a 15 percent flat tax. According to Tax-news.com, the proposal will be unveiled next month:

Czech Prime Minister Mirek Topolanek has reportedly stated that his government’s plan to introduce a flat income tax is a near certainty. In comments made to the daily Hospodarske Noviny newspaper, Topolanek said that at the moment, a 15% flat tax rate is “certain”. … The reform package will be published by the government in April. … Initially, the coalition had planned to introduce a flat tax at a rate of 17% to 19%. Corporate tax in the Czech Republic was reduced to 24% last year, and personal income tax rates are levied at progressive rates to a maximum of 32%.

Given the government’s precarious hold on power, it is unclear whether the proposal will be enacted. A Czech news service notes that the economic community likes the flat tax, but there is some concern that it will not get enough votes:

Analysts are cautiously optimistic that the government’s upcoming flat tax and other tax reforms, set to be announced April 3, may strengthen public finances. However, while all the analysts spoken to by CBW agree a tax reform is much needed, and that the proposals published thus far would have a positive impact on the economy, they caution that the draft legislation is still a long way from the law books and is likely to change before it gets there. … David Marek, macroeconomic analyst, with brokerage Patria Finance said that the lower corporate tax rates are the most important part of the reform because they will give the Czech Republic one of the lower corporate tax rates in Europe and encourage foreign direct investment.

But if it did get enacted, it would create additional pressure on Western Europe’s welfare states. One can only imagine that French and German politicians are praying that the flat tax is not adopted.